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Yet Europe became the birthplace of democracy and the Industrial Revolution, driving the Great Enrichment, while China stagnated until the end of the twentieth century and was always ruled by autocracies. Two Paths to Prosperity traces the emergence of two very different social organizations in premodern China and Europe—the clan and the corporation—showing how they were key factors in the economic and political divergence of these two great civilizations.  In this landmark book, three leading economists offer a bold new account of why Europe and China evolved along such different trajectories. In the early Middle Ages, public goods like risk sharing, religious worship, education, and conflict resolution were provided by nonstate organizations in both societies. China increasingly relied on kin-based cooperation within clans, while weaker kinship ties in Europe gave rise to corporations such as guilds, universities, and self-governing towns. Despite performing similar functions, clans and corporations were built on very different principles—with lasting consequences until today.  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What are the origins of markets? How do governments shape our economic fortunes? What role has entrepreneurship played in the rise and success of capitalism? Tackling these and other issues, the book looks at coercion and exchange in the markets of twelfth-century China, sovereign debt in the age of Philip II of Spain, the regulation of child labor in nineteenth-century Europe, meat provisioning in pre–Civil War New York, aircraft manufacturing before World War I, and more. 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